Gazpromneft Enters China with Quick Lubes

SHANGHAI - Lubricant companies from around the world are flocking to China these days - looking for a slice of what has become the largest lube market, at least according to some estimates.

The number of Russian companies with a presence here is small, but for Gazpromneft-Lubricants the question was not whether to enter this market but how to do it. Now the company has decided to focus on supply of premium engine oils and to build oil change centers as a sales platform for its products.

On one hand, the Chinese market is now 7 million tons per year, which is attractive to any lubricant company, General Director Alexandr Trukhan said during a Nov. 11 interview at Gazpromneft-Lubricants booth at the Inter Lubric lubricants exhibition. On the other hand, there is a lot of competition.

We decided to do our research before deciding exactly what our strategy would be here. We have a line of lubricants that we consider fighting grade, but we dont want to be in that part of this market. Instead were going to focus on higher grade products, because demand for them is growing and they have better profit margin.

Many other foreign companies have also focused on premium lubricants, and indeed foreign companies have the biggest share of that segment of the market. But few have used their own oil change centers as a primary sales channel. Its not a new approach for Gazpromneft, which has a handful of oil change centers in countries such as Russia, Belarus and Italy. Trukhan said the company sees an open niche in China.

Of course, there are places where drivers can get their oil changed, he said. But often the driver will have to leave their vehicle for a day. Our centers will provide their service quickly while you wait. We think there is a demand in China for this service.

Gazpromneft will also aim to supply factory fill lubricants to some Chinese automakers, and he believes his company has an advantage since it already supplies some Chinese OEMs in Russia.

Trukhan declined to disclose where Gazpromnefts first oil change centers will be or to discuss the number of centers it hopes to establish. Its difficult to imagine significant sales volumes until it reaches a large number of centers, but for now the company is pleased simply to establish a presence here.

We want to prepare for the future, Trukhan said. We may actually be a bit late for this market.